PIERER Mobility Executive Board "expects a decline in motorcycle and bicycle sales of 10-15%" in 2024
In updating its guidance for 2024, the PIERER Mobility Management board has stated that it "continues to anticipate a difficult global economic environment, driven not least by persistently high inflation rates and wage and salary developments with far-reaching influences on price developments worldwide.
"The PIERER Mobility Group will use 2024 as a consolidation year to strengthen its core business. The cost-reduction measures already initiated in the 2023 financial year will be intensively pursued and supported by further relocations of production and development capacities to the joint venture partners in India and China. The total cost savings in the 2024 financial year will amount to a high double-digit million amount".
In mid-June 2024, the Group announced that it was adjusting its guidance in response to tougher global conditions. It stated that sales were falling "short of expectations" due to the persistently high interest rates in the USA "and volatile market environment in Europe".
The company is therefore implementing a comprehensive package of measures, involving tighter cost management and reduction of production volumes in Austria, expansion of the supply chain in India and China and realignment of the bicycle division.
"In the current financial year, momentum in PIERER Mobility's core motorbike markets in the USA and Europe has slowed significantly. Due to the latest interest rate decisions in the USA, interest rates are expected to remain high, which will have a negative impact on sales expectations for the American market.
"Sales figures in Europe are also still volatile. Overall, PIERER Mobility's sales figures will fall short of expectations this year after three years of above-average success. This means that dealers will have to reduce their inventories and thus continue to tie up considerable capital. The PIERER Mobility Group is, therefore, continuing its efforts to strengthen its dealer structure through extended payment terms and higher discounts. These measures have already led to a sharp increase in working capital in the past financial year. Management expects working capital and the associated capital commitment to remain high in 2024. This is expected to have a significant negative impact on EBIT and the financial result in the current financial year".
The tighter cost management and reduction of production volumes in Austria are said to be due to the production costs of motorbikes in Europe having "risen due to high wage settlements and increasing costs in connection with regulations and bureaucracy, putting a strain on competitiveness. Production volumes are therefore being significantly reduced at the production site in Mattighofen, Austria". At the same time, the company is tightening cost management throughout the Group.
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| Stefan Pierer, Chairman of the PIERER Mobility Executive Board |
"With the growth in sales figures over the last ten years, the number of employees at the motorbike subsidiary KTM AG has more than doubled. In view of the changed location and market situation, the number of employees has now had to be adjusted. This reduction in personnel after years of rising employment is painful, but necessary in order to maintain and secure the competitiveness of the production site".
The Group says that another priority in 2024 is to increase efficiency in product development. "The focus will be on aligning and prioritising activities in line with the Group's premium brand strategy and streamlining development processes. Following on from this, joint research and development with the strategic partner Bajaj Auto in India and the JV partner CFMOTO in China will be expanded at the respective locations".
Due to the increasingly fragile supplier industry in Europe, the PIERER Mobility Group is "utilising the favourable economic conditions in these regions to secure its competitiveness. An efficient and high-quality supplier industry is being established there.
For the 2024 financial year, the PIERER Mobility Executive Board says it expects a decline in sales of 10% to 15% for both the motorcycle and bicycle divisions due to the current market developments.
In the Motorcycles segment, the Executive Board assumes that the cost savings introduced in the current financial year will be able to compensate for the negative effects of declining sales to such an extent that a balanced to slightly positive EBIT can be generated. "The development of existing dealers and the further expansion of the dealer network to support the brand strategy will be key issues in 2024".
Earlier this year (March 27, 2024), KTM parent company PIERER Mobility confirmed 2023 total sales revenue of € 2.661m (+9.2%), with EBIT at
€ 160m and EBITDA of € 323.5m "despite difficult economic conditions and a radical change in the bicycle industry ". This was on sales of 381,555 motorcycles (+1.6%) and 57,358 bicycles (+33 %).
At the time, the company also announced that it had accepted that negative free cash flow of € -413.0m (compared to € -2.8m in 2022) was a price worth paying in order to maintain a capital and R&D investment programme into further growth that equated to 9.2% of sales with approx. € 195.1m invested in product development and tooling and € 88.9m in operating facilities and infrastructure.
Thanks to the company's strong equity base and long-term financing, it has sufficient long-term liquidity reserves available to allow it to make decisions like that - of the 6,184 employees it had at the end of last year (around 5,000 of them in Austria), the R&D workforce was some 1,300 employees - around 21% of the total workforce, with approx.
€ 3.9m invested in the training and development programme for employees, including around 220 apprentices.
Impressive stuff, which goes a long way to explaining the financial resilience that has allowed it to make so many business development moves in recent years and introduce so many new models - 72 new and revised models from the three core brands, with 280,206 KTM motorcycles sold, 67,462 Husqvarna motorcycles sold and 29,532 GasGas motorcycles sold in the 2023 financial year - that is in addition to the motorcycles sold by MV Agusta (1,852) and CFMOTO (2,503) - with around two-thirds of PTW sales sold in markets outside Europe.
